[zx10guy]

I'm assuming the 5% you're putting away in your 401k at least covers your corporate match if any. Are you putting away enough to reach the max Roth IRA you can contribute per year per the IRS rules? If not, that should be your next priority.

As to your credit, it's fine where it is.

[ToddBlack88]

Originally Posted by Mosaud1998

Good credit can be the make-or-break detail that determines whether you get a mortgage, car loan, or student loan. Bad credit, on the other hand, will make it difficult to get a credit card with a low-interest rate and more expensive to borrow money for any purpose.

I understand, thanks.

I have always just gone in for my mortgage or a loan or what have you, and when they offer a rate I laugh at them and get up to leave. We sit back down and negotiate from there. . It’s worked so far!

[IllSic_Design]

Originally Posted by ToddBlack88

I understand, thanks.

I have always just gone in for my mortgage or a loan or what have you, and when they offer a rate I laugh at them and get up to leave. We sit back down and negotiate from there. . It’s worked so far!

Lol yeah I'm not sure that would work here, unless you are wealthy with a big bank account to back it up. You are approved for rates on pretty much your credit score and debt to income ratio here for the most part

[evil-G-nius]

I'm in the "Pay it off" crowd. When I had my loan I paid it off early and I just felt better getting back to having zero debt. Now the one thing I didn't know or even think about, my credit took a hit when I paid the car off. If that is of interest to you keep it in mind, as far as the big 3 are concerned you "closed" the account which is a no no. Even though you did good and paid your bill ontime...to them YOU closed the account and that is negative. Credit is one of the biggest scams on Earth next to insurance. LOL

[zx10guy]

The only time I've been able to overtly negotiate an interest rate on a loan is with an automotive loan.

With a mortgage it's pretty much cut and dry where the negotiation is typically around any fees/closing costs.

I have two BMW financial loans currently. Both on motorcycles. One is at 1.99% for 5 years. The other is for 4.99% for 5 years. The 1.99% I put down some money but not a lot with the very intention of taking the loan out to term or close to it; as many here have stated correctly that it's cheap money. The 4.99% was just taken out in February where I put down a decent down payment. But I'm intending on having it paid off by October/November.

When you look at various things regarding finances, feels don't get you rich. If you have a situation where you can cheaply use someone else's money so you can use your own money put into investments, that's a no brainer for me. And with you being 24, something that really hasn't been discussed or emphasized. You have TIME. Time is that commodity which you can't buy and is priceless. The more time you have to invest and let it sit to grow, the more you'll make out in the end without having to put a whole ton in versus someone that starts late. There are a ton of tables/charts comparing how much someone would need to invest per month to reach say a million if they started in their early 20s versus someone that starts in their 30s, 40s, or even 50s. The amount of cash you have to put in per month as you get older to reach the same goal is staggering compared to if you've started earlier with less per month.

[e90335e36m3]

I haven't seen a post about your salary in a while. What are you making these days? Care to share the net worth at 24? Just kidding...but seriously. If you don't have any other debt with higher interest that you can pay off, I'd pay the car off as quickly as possible.

[Bc2005]

If you have extra cash and can invest in a Roth IRA, invest now and for every year you qualify. Assuming you chose something simple like putting it in an S&P 500 fund or ETF, it will require no management. And it will grow with the market up to age 59 1/2 when you can withdraw with no penalty or taxes. That means that on money invested at age 24 you would get about 36 years of investment income that will be tax free. And you could leave it even longer and get more tax free income if you don’t want to withdraw at 59 1/2.

Everyone who put the same amount in a non-Roth IRA will be paying full state and federal income tax on that investment income when they withdraw at 59 1/2. It’s painful to have $1M (or more) in a taxable IRA and realize taxes will take about 25% of it whenever you withdraw.

[unluky]

That's cheap. Keep the loan open and help your credit and then take that extra money and buy an i Bond or something that will draw you 9%. Then your money will make you money instead of costing you money.

[zx10guy]

Originally Posted by Bc2005

If you have extra cash and can invest in a Roth IRA, invest now and for every year you qualify. Assuming you chose something simple like putting it in an S&P 500 fund or ETF, it will require no management. And it will grow with the market up to age 59 1/2 when you can withdraw with no penalty or taxes. That means that on money invested at age 24 you would get about 36 years of investment income that will be tax free. And you could leave it even longer and get more tax free income if you don’t want to withdraw at 59 1/2.

Everyone who put the same amount in a non-Roth IRA will be paying full state and federal income tax on that investment income when they withdraw at 59 1/2. It’s painful to have $1M (or more) in a taxable IRA and realize taxes will take about 25% of it whenever you withdraw.

This exactly. I didn't realize the power of a Roth until much later. Had I known what I know now, I'd be funding the crap out of it as I quickly didn't qualify to contribute due to my income being too high. There are ways to back door it such as doing a Roth conversion and paying the taxes up front now. But my IRA account is substantial enough where I'd be facing a huge tax bill. So I'm looking at other strategies which would hopefully lower the sting of paying taxes upon drawing out from my IRA such as trying to make sure my needed draw per year is at the lower tax brackets. The other way I'm looking to mitigate this mistake is to boost up my non-qualified (regular investment) accounts where I can draw from those at a different tax rate.

The other thing to look at with a Roth is it's not locked in money you can't access. You can pull out what you put in without penalty if you ever need the money. It's the appreciation that you get hit with penalties on.

As I mentioned above, I'd fully fund a Roth first before considering anything else to do with any excess money before the Feds start monkeying around with Roth's as they did with 401k's and the required minimum distribution that went into effect.

[Mosaud1998]

My employer uses Empower retirement. I'm thinking of investing 5% into ROTH IRA instead of 3% ROTH IRA and 2% normal.

I could switch over to vanguard too.

[Mosaud1998]

Originally Posted by zx10guy

I'm assuming the 5% you're putting away in your 401k at least covers your corporate match if any. Are you putting away enough to reach the max Roth IRA you can contribute per year per the IRS rules? If not, that should be your next priority.

As to your credit, it's fine where it is.

I've got no clue what the max IRS rile for Roth IRA is in IL

[Mosaud1998]

Originally Posted by Bc2005

If you have extra cash and can invest in a Roth IRA, invest now and for every year you qualify. Assuming you chose something simple like putting it in an S&P 500 fund or ETF, it will require no management. And it will grow with the market up to age 59 1/2 when you can withdraw with no penalty or taxes. That means that on money invested at age 24 you would get about 36 years of investment income that will be tax free. And you could leave it even longer and get more tax free income if you don’t want to withdraw at 59 1/2.

Everyone who put the same amount in a non-Roth IRA will be paying full state and federal income tax on that investment income when they withdraw at 59 1/2. It’s painful to have $1M (or more) in a taxable IRA and realize taxes will take about 25% of it whenever you withdraw.

I think my employer automatically invests in my retirement. I haven't gotten the chance to figure out how to pick my own investments. Been too damn busy

[zx10guy]

Originally Posted by Mosaud1998

I've got no clue what the max IRS rile for Roth IRA is in IL

It's not based on where you live. It's based on income levels and it's a sliding scale. Here's a chart that lays everything out for you.

https://www.schwab.com/ira/roth-ira/...more%20rows%20

[zx10guy]

Originally Posted by Mosaud1998

My employer uses Empower retirement. I'm thinking of investing 5% into ROTH IRA instead of 3% ROTH IRA and 2% normal.

I could switch over to vanguard too.

I'd figure out what percentage you have to put in to get the full employer match. If it's 5% then, put in 5% into your 401k. After that, I'd plow all the excess into hitting the IRS limit for your Roth.

Contributing into your 401k at the minimum amount to get the full employer match guarantees you're maximizing getting all that free money. Another way to look at it, you're getting a 100% return with a company match.

[Mosaud1998]

Originally Posted by zx10guy

I'd figure out what percentage you have to put in to get the full employer match. If it's 5% then, put in 5% into your 401k. After that, I'd plow all the excess into hitting the IRS limit for your Roth.

Contributing into your 401k at the minimum amount to get the full employer match guarantees you're maximizing getting all that free money. Another way to look at it, you're getting a 100% return with a company match.

I'll contact HR on that since I've tried figuring it out and I've gotten nowhere

[Mosaud1998]

Originally Posted by zx10guy

I'd figure out what percentage you have to put in to get the full employer match. If it's 5% then, put in 5% into your 401k. After that, I'd plow all the excess into hitting the IRS limit for your Roth.

Contributing into your 401k at the minimum amount to get the full employer match guarantees you're maximizing getting all that free money. Another way to look at it, you're getting a 100% return with a company match.

5% into ROTH IRA or normal retirement fund?

[zx10guy]

Originally Posted by Mosaud1998

5% into ROTH IRA or normal retirement fund?

Fund your Roth as much as you can afford ideally up to the IRS limit for your income bracket after you've put in the amount to get the company match in your 401k.

Roth allows you to draw out of the account after age 59.5 without any taxes or penalty. That's why having a Roth fully funded is such a huge financial tool towards retirement and wealth. Something I regret everyday for not fully funding mine. I have a very modest Roth account that I cannot contribute into due to my income. I mistakenly chose the route of hitting the IRS limit for 401k contributions thinking that was the best choice taking the tax deduction now due to 401ks contributions lowering your AGI. Had I were to do it again, I'd fully fund the Roth to the limit and any excess would go back towards funding a 401k.

[Mosaud1998]

Originally Posted by zx10guy

Fund your Roth as much as you can afford ideally up to the IRS limit for your income bracket after you've put in the amount to get the company match in your 401k.

Roth allows you to draw out of the account after age 59.5 without any taxes or penalty. That's why having a Roth fully funded is such a huge financial tool towards retirement and wealth. Something I regret everyday for not fully funding mine. I have a very modest Roth account that I cannot contribute into due to my income. I mistakenly chose the route of hitting the IRS limit for 401k contributions thinking that was the best choice taking the tax deduction now due to 401ks contributions lowering your AGI. Had I were to do it again, I'd fully fund the Roth to the limit and any excess would go back towards funding a 401k.

Can I PM you?

[zx10guy]

Sure.

[2000cs]

Late to the party.

I look at the interest rate and cash flow, plus the risk.

Your interest rate is low but not dramatically low for a short term secured loan. Normally I would recommend paying off higher interest debt first, but since this is your only loan that isn’t an option. Interest on car loans is not tax deductible (for individuals).

Cash flow with car and other short term loans is terrible, because the principal being paid is high. I’d rather have a 2.5% mortgage on my house for 30 years than a lower rate on a car loan because of the deductibility of the mortgage interest and the lower relative cash flow requirement. Either way, the cash flow requirement of a car loan can press the ability to make discretionary payments for things like food, medicine, entertainment, etc - especially with inflation taking more of your disposable cash.

To illustrate the cash flow and interest rate issues, assume you have $9,500 savings to either invest or repay the car loan. Your payment of $315/month is $3,780 annually. Let’s assume your interest is about $15/month or $180/yr (1.9% x 9500). If you invest the $9,500 in an iBond as someone suggested above, earning 9%, you will earn $855/year. That is more than your interest cost by $675/year but less than your cash flow by almost $2900/year. So you need a source (your income) to pay the cash flow requirement even if the investment is a good one. (There are of course other investment choices, this is for example)

The risk issue is whether you can continue to make the payments if something happens to you, like a job loss, or if your cash flow is already tight enough that one hiccup might cause you to miss payments. You apparently have enough savings that you can take that risk if you choose (keep the loan). This is the issue that causes many to choose to repay early, even if the cash flow and the interest rate are attractive. It is also the source of “hating” debt for most.

Debt is a useful financial tool. If you can borrow at a low rate and reinvest at a higher rate, then you’re doing it right - especially if your debt payments are matched to your investment income and time horizons. However if you use debt to just buy more stuff, you are digging a financial hole that can be difficult to climb out of. OP appears to be keeping his debt low, so could invest his savings and earn a good return.

Money and debt are like anything else: the more you learn and the more you engage in managing them, the better you will do over the long run.

[Pauldunlop13]

I am a Canadian that lives in the US, and when I was in Canada I didn't know my credit score either - I got the lowest rates, and never denied, so it was not needed

When I moved to the US, I had to learn all about credit scoring and raising it up from the 500 score they started me at (they don't recognize any of your financial activity from Canada


So - to the OP - if this is your only loan, then paying it off and closing it will drop your score by 10-20 pts, as you need 1 loan active to satisfy the Credit Mix part of your scoring

I personally would start making the minimum +$10 payments on it, and use the extra money elsewhere. Saving for the Rainy Day fund as someone else mentioned

[zx10guy]

The over emphasis on your credit score is amazing here. Unless you're about to take out a loan, it shouldn't matter. His score is fine right where it is. I was able to get very good rates when my score was around where his is. Since then, I've done very little in regards to taking out a loan and making payments on it. Yet, my score was at 850 which is the max until I did a hard credit pull to refi my house along with buying my new S1000RR. Even after those two events being a couple months apart from each other, my score didn't drop below 830 to 840 (if I remember correctly). Over the past couple of months, it's migrated back up to almost 850 again.